Green Dragon Gas : Operations Update

26 July 2016

GREEN DRAGON GAS LTD.

('Green Dragon' or the 'Company')

Operations Update

Green Dragon Gas Ltd. (LSE: GDG), one of the largest independent companies involved in the production and sale of Coalbed Methane ('CBM') gas in China, is pleased to announce an operations update for the six-months ended 30 June 2016.

In H1 2016 Green Dragon has continued to focus on the implementation of its infrastructure programme aimed at increasing gas processing and sales capacity from its existing drilled wells. The programme is concentrating on the connection of existing drilled wells to sales infrastructure together with the installation of significant additional compression across the production circuits. By increasing and rebalancing the compression installed across the production circuits, the Company is seeking to lower wellhead pressure resulting in significantly increased gas recoveries from existing wells.

Operational highlights

· GSS H1 2016 sales volume up 62% and 43% versus H1 and H2 2015 respectively

· Reached a H1 2016 sales peak of 6.0mmcf/day (170,000m/day) at GSS, an increase of 18% compared to 31 December 2015

· Continued focus on infrastructure and compression across the GSS production circuits

· First screw compressor installed at GSS in April 2016, allowing wellhead pressure to be taken to vacuum,resulting in an increase in gas sales of 45% from the well

· Run-time efficiency of compressors at GSS of 87% in H1 2016 with average uptime of 93% recorded through June 2016

· The Company reiterates its exit rate production capacity target of 16 bcf for year end 2016

Randeep S. Grewal, Chairman and Founder of Green Dragon, commented:

'I am pleased with the continued progress we have made in the first half of 2016 in relation to infrastructure and creating the foundation for continued increases in sales volumes from the existing well stock. We have demonstrated the potential of our wells by consistently delivering increased sales volumes and with our focus on compression and production infrastructure we expect this to continue through the end of 2016 and into 2017. Our final challenge on our large GSS project is increasing gas sales by reducing casing pressure at the well bore on the currently drilled well stock where production capacity is significantly higher than the current gas sales. I am satisfied with the first well head screw compressor installed on well GSS188, which has resulted in the 45%increase in its gas sales. As the proof of concept has been successful, we can now focus on repeating the same technological improvement on the rest of the well stock.

'This year marks the Company's 10 anniversary of admission to trading on the London Stock Exchange and the turning point for our operations. The road here has been long and, at times, challenging. However, with continued perseverance I am confident of delivering significant value to our shareholders.'

Upstream

Production and Infrastructure

· Continued focus on infrastructure and increasing gas production for sale

· 708 wells producing gas for sale across all blocks (2015: 666)

· H1 2016 well counts across all blocks summarised as follows:

· Gross production capacity across all licence areas increased to 6.01 bcf (H2 2015: 5.44 bcf)

Exploration

· Significant progress made on GGZ block ahead of planned Chinese Reserve Report this year

· 2 wells tested successfully across 3 production horizons

· 5 wells came online with 2 producing gas

Downstream

· Green Dragon equity gas H1 2016 sales mix split was 94% PNG and 6% CNG (2015: 95% PNG; 5% CNG)

· Sales at GSS increased to 1.07 bcf (H2 2015: 0.75 bcf) an increase of 42% versus H2 2015

· Sales and production for the last 3 periods are summarised as follows:

10.00% Green Dragon Gas Ltd. Bond ISIN: NO 001 072437.0

As stated in the 2015 financial statements published on 27April, 2016, the results do not include the Group's share of CNOOC GSN transactions or operated GSS 1,388 well's revenue, associated costs and results margins. The sales revenues and volumes associated with the CNOOC operated areas of GSS and GSN, for period ending year end 2015, will be reported in due course as they are currently being audited by independent auditors.

Upon conclusion of the audit, the Interest Coverage Ratio and Leverage Ratio for the Company's outstanding Bond, currently not compliant, shall be adjusted in accordance with the results.

Green Dragon continues to pursue the completion of the CNOOC audit so that they will be able to give a final and conclusive statement of their results for the year to 31 December 2015.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

For further information on the Company and its activities, please refer to the website atwww.greendragongas.comor contact:

Instinctif Partners

David Simonson / George Yeomans

Tel: +44 20 7457 2020

Citigroup

Tom Reid / Luke Spells

Tel: +44 20 7986 4000

Peel Hunt

Richard Crichton / Ross Allister

Tel: +44 20 7418 8900

About Green Dragon Gas

Green Dragon Gas is a leading independent gas producer with operations in China and is listed on the main market of the London StockExchange (LSE: GDG). The Company has 549Bcf of 2P reserves and 2379Bcf of 3P reserves across eight production blocks covering over7,566km² of licence area in the Shanxi, Jiangxi, Anhui and Guizhou provinces. It holds six Production Sharing Agreements with strong, highly capitalised Chinese partners including CUCBM (CNOOC), CNPC and PetroChina, and has infrastructure in place to support multiple routes to monetise gas production.

END